The refinancing rate is ... Calculating the refinancing rate

Today we will try to find out what exactly affects the fluctuation of credit bank rates, why we pay additional commissions when repaying interest on loans, what additional deductions should be considered in insuring our own lives.

The central bank as a key element of refinancing

The refinancing rate is primarily a tool through which commercial financial institutions are provided with the means of the Central Bank. What is the role of this government body?

Everybody knows that the Central Bank is responsible for all monetary policy, and the goal of this activity is to ensure the welfare of the population of the country (at the proper level). This is part of a long-term strategic government policy towards maintaining a decent GDP slat.

The central bank has its levers of influence, which are called impact mechanisms. They are approved by law and are the following:

• Limitation of operational rates of commercial banks;
• Reserve rationing;
• Operative intervention in the open market;
• Issuing activity;
• Currency regulation;
• Refinancing rates of commercial organizations engaged in lending.

Concept and calculation of the refinancing rate

Since we have started talking about the instruments of influence of the Central Bank, we will dwell on the last and, in its way, the most important of them. The refinancing rate is an indicator that is formed relative to economic and inflationary processes in the state. As a rule, it does not require additional calculations, since it has a clearly established coefficient in a certain period, but more about this later.

Now we should understand that it directly affects the level of availability of loans for the general population. The refinancing rate is the amount that regulates the number of loans in the country. In other words, the lower it is, the more likely it is that households will be able to pay a penalty and accruals on borrowed funds.

On entrepreneurial activity, the rate level affects approximately the same way. The lower it is, the more negotiable borrowed funds can be attracted to your own business. Because the percentage is rather low.

Refinancing and the state

So, we realized that the level of this coefficient directly affects the welfare of both households and business entities. What is its role for the state? The government, in turn, determines the level of taxes, fines and penalties at the refinancing rate. In other words, the entire fiscal policy of the state depends on it .

Well, since this coefficient is a general regulator of cash flows, there is a certain relationship: once the inflation rate in the country begins to be selected to the maximum level, the rate, accordingly, rises, thereby reducing the amount of borrowed funds at the disposal of the population.

As for the fiscal policy itself, the regulatory process is much more complicated.

Refinancing and your credit

Consider first the most important tax for all representatives of households - personal income tax. When an ordinary person takes a loan from a commercial bank, and it's time to pay interest, he does not think much about which hidden fees are refunded additionally. Consider the example. Suppose that the interest rate of refinancing at the time of issuing borrowed funds is set by the state at a rate of 15%, while the bank gives funds at 11%. The optimal creditor ratio, according to the current legislation (Article 212 of the Tax Code), will be 75% of the state-established, that is 11.25%.

It turns out that the borrower saves 0.25% of the loan, taking a loan from this bank. With this amount and will be deducted from him personal income tax as an additional benefit. It is, as a rule, included in the costs of loan servicing, and often no one pays special attention to them, because they accumulate a little.

Refinancing and business

Entrepreneurs in the conduct of normal operating activities, the rate of the Central Bank (refinancing) can only concern if they are calculated for purchased goods or services by securities (for example, bills or bonds) that were previously purchased from a third party. The given condition concerns only those cases when the goods are taxed with the VAT base, and the transaction is carried out on the territory of the Russian Federation.

Then the nominal value of taxation will increase by the amount of income from securities. In this case, only the revenue part is taken into account, which will exceed the allowable value for the initial calculation, in accordance with the effective refinancing ratio.

In this case, the refinancing rate is the amount that your business can suffer. Therefore, if this indicator when buying a bill was higher than at the time of the transaction, the entrepreneur will lose. If, on the contrary, the rate has grown - it will remain in profit from the operation.

Refinancing and insurance

Among other things, the refinancing rate of the CBR exerts a certain degree of influence on the incomes of citizens in the event that they insured their lives. How it works?

As an example, take the popular type of insurance at one time - reimbursement of a certain amount of money after reaching a particular age. Suppose, the policyholder regularly contributed from his own pocket for several years, and now the cherished year of payment has come.

Here it is important to understand the extent to which the state submitted the refinancing rate at the time of the conclusion of the insurance contract. If on the day of payment the amount of compensation does not exceed the total index of premiums increased by the coveted ratio, then there is no reason to fear anything. If on the contrary, then from the difference you will need to pay a personal income tax for the additional benefit received.

How are refinancing rates changed by year?

Over the past decade, this coefficient fluctuates between 7-9%, indicating some stability in the country's monetary and credit market . Nevertheless, I would like to consider situations where the rate directly affects the behavior of commercial banks.

For example, the refinancing ratio has increased. In this case, credit unions and other institutions engaged in the provision of loans should somehow compensate for the expected decline in demand for their services. It's simple - the interest on providing funds will increase.

But that's not all. Such coefficients change for a reason. Most likely, if this happened, then the state introduces a new fiscal policy to regulate inflationary processes. And this means that further reforms will follow in the form of legislative regulatory acts, therefore, banks will have to adjust their business to the latest trends.

Refinancing and capitalism

Consider the situation on the example of a country with a developed market economy - the United States. The refinancing rate for today plays an important role in the fiscal regulation of cash flows and the formation of the federal reserve. In America, this indicator determines the percentage that a commercial bank must pay in case of temporary use of public funds. Therefore, if this coefficient is rather low, then the commercial system is not threatened, and it can easily carry out operational activities. However, once the rate starts to increase, the activity of credit institutions is also threatened, since the likelihood that they will be able to pay their own liabilities falls sharply, which subsequently threatens to default.

Refinancing rate in the Russian Federation

At one time, this indicator played a significant role in regulating cash flows in the country's open spaces. So, in the fight against inflation trends in 1992-1996, this ratio reached 99%.

When such flows, inherent in an unhealthy economy, were relatively successfully settled, then the indicator began to fall invariably. Now, commercial financial institutions can easily and at a very adequate rate provide both long-term and fairly short-term loans (and sometimes even give out loans for one night or days off) without sacrificing either their reputation or the interests of their clients.

Moreover, it should be noted that the refinancing rate for today in the Russian Federation is only informative, which is legislated and has guarantees until January 2016.